Yes that is what Albides is implying.
It was Paw who implied it, but he had the good grace to overlook it. But I agree with it anyway, so that's not a problem.
Well I don't believe it! That's Albides's view on it, not mine! To me, Nirn and Aurbis is real and it's not just a dream that some overlord is having and when he wakes up he'll be saying, "Whoa, I just had the strangest dream about this mortal plane called Nirn with these heroes saving this empire called Tamriel..."
See, the reason you're prepared to reject the idea is that it makes your experience seem less "real", by which I take it you mean illusory and transient. The problem here is there's no real with which to compare it. It isn't illusory or transient because there's no way of waking from the dream except by stepping outside of the game, but you're going to be doing that anyway while we're here talking to each other. There is, however, a way of controlling the dream. That overlord is you, the protagonist in your dream episode. The people you're talking to are also you. There's a reality, it's just a solipsistic reality. Your achievements are going to still have impact, but, what's more, you are capable of even greater achievements because of the awareness that you are a fragment of God. Yes, it's convoluted mental mastvrbation, but no, that's not necessarily a bad thing.
I don't get what you're saying.
He's saying it's what the lore says. It's a common sort of theme and the texts have been gradually building up to it.